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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Entry of new firms shifts the cost curves for all firms downward






2. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






3. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






4. The practice of selling essentially the same good to different groups of consumers at different prices






5. The mechanism for combining production resources - with existing technology - into finished goods and services






6. A firm that has market power in the factor market (a wage-setter)






7. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






8. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






9. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






10. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






11. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






12. Ed < 1






13. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






14. The difference between total revenue and total explicit and implicit costs






15. Occurs when LRAC is constant over a variety of plant sizes






16. MUx / Px = MUy/Py or MUx/MUy = Px/Py






17. Exists if a producer can produce a good at lower opportunity cost than all other producers






18. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






19. A good for which higher income increases demand






20. Ed > 1 - meaning consumers are price sensitive






21. A good for which higher income decreases demand






22. When firms focus their resources on production of goods for which they have comparative advantage






23. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






24. AVC = TVC/Q






25. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






26. The rational decision maker chooses an action if MB = MC






27. The imbalance between limited productive resources and unlimited human wants






28. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






29. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






30. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






31. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






32. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






33. The sum of consumer surplus and producer surplus






34. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






35. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






36. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






37. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






38. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






39. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






40. The additional benefit received from the consumption of the next unit of a good or service






41. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






42. Two goods are consumer substitutes if they provide essentially the same utility to consumers






43. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






44. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






45. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






46. The change in quantity demanded resulting from a change in the price of one good relative to other goods






47. The most desirable alternative given up as the result of a decision






48. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






49. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






50. Exists at the point where the quantity supplied equals the quantity demanded